Sound familiar? Canadians buy a whole lot of property in the U.S.

The only foreign buyers who bought more U.S. real estate than Canadians were Chinese.

The Canadian saga with foreign homebuyers continues.

On Tuesday, the NDP-led government in British Columbia unveiled a budget that included even stricter regulations targeting foreign homebuyers, who will soon be subjected to a 20 per cent transfer tax and additional surcharges for maintaining unoccupied properties.

But while Canadians tighten the squeeze on foreign homebuyers at home, we continue to be among the largest purchasers of real estate south of the border.

A report by the National Association of Realtors (NAR) revealed that in 2016-2017, Canadians were the second most active group buying residential real estate in the U.S. Buyers from China topped the list.

From April 2016 to March 2017, foreign buyers in the U.S. acquired 284,455 residential properties representing 10 per cent of all sales by dollar amount or 5 per cent of all existing dwelling sales.

In addition to China and Canada, other dominant buyers of American residential real estate included buyers from the U.K., Mexico and India.

The trends in foreign homebuying in the U.S. and Canada are eerily similar. Just like Canada, the average price of homes purchased by foreign buyers ($536,852) was 93 per cent higher than the average price of all existing home sales.

Similarly, foreign buyers were more likely to make cash purchases rather than securing mortgage financing. Almost 44 per cent of the foreign home purchases were cash transactions compared to 25 per cent of all existing sales.

Some interesting differences between Canadian and American markets emerge when one distinguishes between homes purchased by non-resident foreigners — who are essentially non-U.S. citizens living abroad —and resident foreigners, who are recent immigrants (not citizens) with fewer than two years of stay in the U.S. or are temporary visa holders.

Most of the buyers from China, India and Mexico are resident foreigners reflecting their status as recent immigrants, students, or temporary workers. In comparison, the bulk of the buyers from Canada and the U.K. are non-resident foreigners who mostly purchased vacation homes.

Canadian purchase of U.S. residences has steadily declined from 69,000 units in 2010 to a little less than 34,000 in 2017. In contrast, the same period witnessed a dramatic increase in the number of dwellings purchased by Chinese buyers rising from 27,000 units in 2010 to 40,500 units in 2017.

The heightened Canadian interest in 2010 was perhaps a result of the collapse in housing markets in the U.S. that made residences in Florida and Arizona significantly cheaper for Canadian buyers.

Since 2015, one can spot a considerable decline in the share of purchases by non-resident foreigners from Canada, China and the U.K. Increasing employment opportunities in the U.S., higher home prices in Canada, and Brexit in the U.K. are likely to have caused a decline in the share of non-resident foreigners.

The U.S. sunbelt has been the preferred location for most homebuyers. In fact, 54 per cent of the purchases by foreign homebuyers in 2016-2017 were concentrated in just five states. Florida, with 22 per cent of the sales, topped the list. Texas and California each accounted for 12 per cent of the sales followed by New Jersey and Arizona, each accounting for 4 per cent of the sales.

The average price of American homes purchased by the Chinese has always been much higher than the ones purchased by Canadians. The difference is a result of locational preferences and the intended use of the dwellings.

Whereas Chinese buyers, predominantly resident foreigners, were concentrated in the more expensive housing markets in California, the Canadian snowbirds landed in the more affordable housing markets in Florida and Arizona representing 37 per cent and 17 per cent of all Canadian purchases respectively.

Even though foreign homebuyer purchases account for approximately 5 per cent of the residential units sold in both Canada and the U.S., the opposition to foreign homebuyers is much stronger in Canada. The reason behind it is not likely the concentration of foreign homebuyers, but the difference in the pace at which home prices have recently escalated in the two countries.

The IMF Global Housing Watch revealed that the real home prices in 2017 increased by 11.3 per cent in Canada compared to 4.3 per cent in the U.S.. The house price escalation was even more dramatic in Toronto and Vancouver.

Whereas additional taxes on foreign homebuyers in Canada will temporarily stop housing prices from escalating, an adequate response to a sustained global interest in Canadian real estate is a systematic increase in housing supply.

Murtaza Haider is an associate professor at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at info@hmbulletin.com.